A New CJEU Judgment on Copyright-Related Geoblocking – One Step Forward or One Step Back in the EU Commission’s Fight Against Geoblocking? (Guest Blog Post)
by guest blogger Marketa Trimble
May a licensor limit a copyright license to a certain part of the European Union? The answer lies at the intersection of EU copyright law, EU anti-geoblocking law, and EU competition law. The three areas of law are the moving parts that the European Commission, through its different Directorate-Generals, tries to combine to reach the Commission’s goal of creating a single digital market in the European Union – a market not impeded by geoblocking or other territorial limitations. A December 9, 2020, decision by the Court of Justice of the European Union (“CJEU”) is another milestone in the Commission’s anti-geoblocking mission.
Copyright Law: EU copyright law includes no provisions that generally prohibit a licensor from granting a territorially-limited license; there is but one exception – the EU Cross-Border Portability Regulation, which arguably has a very constrained scope (more on this Regulation in this blog post). Of course, the European Commission is not pleased with territorial limitations appearing in copyright licenses because the resulting partitioning of the EU market is antithetical to the Commission’s goals; the Commission would much rather see a single EU copyright that would cover the entire EU single market (see, for example, here), much like copyright under U.S. federal law covers the entire United States. However, since EU member states are resisting the idea of a single EU copyright, the Commission is forced to seek other avenues to steer the development of copyright law and practice into consistency with the idea of a single market – and eventually, perhaps, even prove the inevitability of the single EU copyright (more on the Commission’s steps and also the potential consequences of an elimination of geoblocking here).
Anti-Geoblocking Regulation: The 2018 EU Anti-Geoblocking Regulation targets the major means of partitioning the EU digital single market by prohibiting “unjustified” geoblocking within the European Union (more on the Regulation in this blog post). Initially, it seemed that the Regulation would also apply to geoblocking that was implemented to comply with territorial restrictions on copyright, but eventually, in response to strong opposition, the Commission refrained in its proposal from prohibiting geoblocking in cases of “services the main feature of which is the provision of access to and use of copyright protected works.”
Nevertheless, the European Commission has not given up its idea of eliminating the territorial limitations imposed by copyright licensors. In its November 2020 Report, the Commission evaluated, as required by Article 9 of the Anti-Geoblocking Regulation, whether the Regulation should also apply to geoblocking implemented for copyright-related reasons. With respect to copyrighted works such as music, e-books, and video games, the Commission found no need to eliminate geoblocking “as the catalogues offered are rather homogeneous.” In contrast, with respect to the audiovisual sector, the Commission announced its plan to “engage in a dialogue with stakeholders with a view to fostering circulation of quality content across the EU.”
Competition Law: Another avenue that the European Commission has pursued in its fight against geoblocking has been EU competition law. While EU competition law regulations do not mention geoblocking, the European Commission’s interpretation of competition law implies that geoblocking must be prohibited; a licensor may prohibit “active sales” outside the licensed territory, meaning that the licensor may prohibit the licensee from actively advertising specifically to customers outside the licensed territory. However, such prohibition must not prevent “passive sales” – sales based on “respon[ses] to unsolicited requests from individual customers including delivery of goods and services to such customers.” The European Commission has considered a website “a form of passive selling,” and therefore has viewed geoblocking, which prevents access to a website from outside a licensed territory, as a means of preventing “passive sales.”
In the copyright context, the territorial limitations – including the geoblocking requirements – that attracted the Commission’s attention were the limitations that Paramount Pictures International Ltd. (“Paramount”) and other motion picture studios imposed in their copyright licenses with online distributors of their copyrighted content. In 2014, the European Commission began investigating the licensing practices of the studios. After the Commission had indicated that the studios’ territorial limitations obligations were in violation of EU competition law, Paramount offered to discontinue imposing the obligations, including geoblocking requirements, in its licenses. The Commission accepted Paramount’s “commitments” and made them binding in its decision in 2016.
Not surprisingly, other Paramount licensees in the European Union have not been thrilled by the decision; the elimination of their territorial exclusivity significantly affects their business. Groupe Canal+ therefore brought a case in the CJEU seeking annulment of the 2016 decision. At the first instance the EU General Court dismissed the action, but in the second instance, on December 9, 2020, the CJEU set aside the General Court’s judgment and annulled the Commission’s 2016 decision.
The December 2020 CJEU Judgment: The CJEU annulled the Commission’s decision because of the effects that the decision had on Groupe Canal+; the decision “rendered the contractual rights of the third parties meaningless…and thereby [the Commission] infringed the principle of proportionality.” But the CJEU did not question the Commission’s conclusion that the territorial limitations obligations, including the obligation to geoblock, were anti-competitive in the case, and it is possible that the Commission could require the removal of the obligations in the future after the existing licenses expire. For now, the Commission’s November 2020 Report promises “further assessment and consideration” of any extension of the Anti-Geoblocking Regulation; because of COVID-19, greater access to audiovisual content is no longer the only concern – the Commission anticipates that the planned stakeholder dialogue will also result in proposals for “actions to support the industry’s recovery.”